Dealing with foreclosures

Started by HeatherB3 • 12 replies • 2648 views

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HeatherB3 (Florida)
Posts: 32

Posted:

I want to hear everyone thoughts on this and see if this is standard or is our management company and attorney is just out to make as much money as possible. It just seems weird to me… so I need your comments.

Once a home goes into foreclosure, and this could mean a straight foreclosure (someone not paying their mortgage) or strategic foreclosure (someone that stopped paying their mortgage for a couple of months so they can get a loan mod) or even a loan mod (without missing any payments, but their mortgage company doing a loan mod) there account is sent over to the attorney for monitoring. This means the Homeowner gets hit with a $250 fee, off the top and every month the home is foreclosure, no matter which one, they get charged $50.00.

This is the cost the attorney charges. But, I don’t see why every home that falls into this “foreclosure status” has to be sent to him. Our PM said that it is because generally once a home goes into foreclosure, they stop paying HOA dues, or already behind and a lien needs to be filed immediately to recoup back fees at a later date.

Also, some homes are being sent over to the attorney without being in any kind of status. We had a lady that was late one month, long story but her husband passed away and the last thing she was worried about was paying her HOA dues. I completely understand and the BOD did waive her late fees. She had never been late, ever and she paid the monthly dues just a few days late. Anyway, her account was sent over to the attorney, and we told her it was because she was going through a loan mod and we would not be able to waive the legal fees. She sent us an email and said “I am not going through a loan mod or any other loan foreclosure.” She did not want to pay for it. I am concerned that this is happening more often and the problem I have with it is… if someone is late or having problems paying HOA dues, then they get hit with a $250 fee and an extra $50.00 a month plus late fees and interest, there is no way for them to catch up. We are currently $130k in the arrears, which is about 1/3 of our annual budget, and this problem seems to be growing without resolution. Any advice is appreciated.

GlenL (Ohio)
Posts: 5,491

Posted:

What does your Collection Policy say? We wait 90 days before filing a lien with the court and 120 days before we begin foreclosure proceedings. IMHO it doesn't matter what is happening between the H/O and the mortgage holder only between the H/O and the HOA. And yes if they ignore 90 days of requests for payment and don't make an effort to set up some kind of payment plan; then turn them over and let the fees begin.

Studies show that 5 out of 4 people have problems with fractions

HeatherB3 (Florida)
Posts: 32

Posted:

Our CCR's say that we can file a lien at anytime if the dues are late.

If a homeowner goes into foreclosure and the HOA does not file a lien for backdues or any dues that might be owed, will the HOA miss out on those dues when the foreclosure goes through?

Our PM is telling us that if a lien is not placed before the foreclosure, we will not get anything.

Thanks for helping.

HeatherB3 (Florida)
Posts: 32

Posted:

PeterB1 (Florida)
Posts: 257

Posted:

If a home goes into foreclosure and the owner stops paying dues/fees, a lien is the only way the HOA will see the money. While it is possible for the BOD to file a lien (without an attorney) it is not realistic.

Here is the process we follow (remember, Florida has very specific laws that must be followed FL Statute 720). We notify the owner that we plan to file a lien because of non-payment. After the proscribed waiting period, we request the attorney file the lien. At that point, we charge the owner for the cost of placing the lien AND the cost of removing the lien. If the owner eventually pays, we recover our costs. If not, the lien generally protects us and should allow us to recover our money.

To answer your last point, a lien cannot be placed without providing notice per FL720. So, when the owner is notified (certified mail), he/she still has 45 additional days to make payment before a lien is placed. Placing does NOT get immediate payment. It may 'encourage' some to pay - but it does assure you that some day the HOA will get what it is due.

peter

GlenL (Ohio)
Posts: 5,491

Posted:

Quote:

Posted By GlenL on 04/16/2011 7:20 AM
court and 120 days before we begin foreclosure proceedings.

Oops typo should be 150 days

Studies show that 5 out of 4 people have problems with fractions

CharlesB17
Posts: 112

Posted:

Our association had dealt with these issues for a long time. Allot of attorney fees and little to no return to the association.
Since we began using the software I have mentioned in previous post, our system automatically sends the bills out, then 30 days later it send a demand for payment and intent to lien notice to the past due home owners. 45 days after that the system generates a lien that is automatically sent to the attorney, in a PDF file, for the attorney to print and file. Mind you, the lien form is filled out automatically, so all the attorney does is sign and file. This has cut out cost from $250 to $50. And we get to charge the Homeowner the $50 + certified mailing coast + a $100 administrative fee. Our association has decided to lie over another 90 days before filing foreclosure, upon the advice of the attorney and the courts. Once again the system sends all the previous communications to the attorney to file the case. All records on the property are kept on the server database.
Now, we have had liens in place and the properties have sold and we have had to go collect from the new owners, which leaves a bad taste in their mouth. We have had banks to send us monies, but they are protected and are only liable for a short window period and that has left a bad taste in our mouth.

PeterB1 writes
(Florida)

"If a home goes into foreclosure and the owner stops paying dues/fees, a lien is the only way the HOA will see the money. While it is possible for the BOD to file a lien (without an attorney) it is not realistic.

Here is the process we follow (remember, Florida has very specific laws that must be followed FL Statute 720). We notify the owner that we plan to file a lien because of non-payment. After the proscribed waiting period, we request the attorney file the lien. At that point, we charge the owner for the cost of placing the lien AND the cost of removing the lien. If the owner eventually pays, we recover our costs. If not, the lien generally protects us and should allow us to recover our money.

To answer your last point, a lien cannot be placed without providing notice per FL720. So, when the owner is notified (certified mail), he/she still has 45 additional days to make payment before a lien is placed. Placing does NOT get immediate payment. It may 'encourage' some to pay - but it does assure you that someday the HOA will get what it is due.

Peter”

And he is absolutely correct. Regarding the Florida statutes, And most courts we have found question high collection fees, as they feel the person the association is collecting from is already in dire straits and needs some assistance. So they have shown a tenancy to lean towards the property owners.

IMHO, your attorneys are like so many other CAM operates associations. Get their hooks in, and suck the life out of the home owners with little or no return on your investment.
my2cents - enuff said

MelissaP1 (Alabama)
Posts: 13,836

Posted:

You may want a new Management company. If you have a board then the MC should be doing whatever the BOD wants them to do...NOT the other way around. There should be NO need for a lawyer to be notified of any of the things you said about foreclosures or who owes money. This is out of line of their responsibilities at this point.

It is TRUE that if the HOA doesn't have a lien on a property BEFORE it is BANK foreclosed on, then they are out of luck. However, even with a lien on that property, the HOA is still 2nd in line to get paid. The bank is ALWAYS first to get paid. Even IF the HOA uses it's power to foreclose on a property, the BANK gets paid first.

Our policy was 6 months of Non-payment, we started the LIEN process. Which doesn't require a lawyer to file in many cases. However, if you do use an attorney, then their fees are part of the lien, including late fees and certain interest amounts. (Any special Assessments done in the time frame of the lien can be included). This usually meant that anyone who had short term financial issues wouldn't be hit with a lien but did their best to catch up in that 6 month period.

After about a year or more, we considered the "Foreclosure" process on a property that was behind in dues but up to date with their bank payments. Mostly rental properties who's owner's were behind we would consider pursuing foreclosure IF they were a continued problem. However, foreclosure is a last resort.

If the bank owns the foreclosure, then don't expect payment of back dues any time soon. They most likely will pay up for the time period they owned the property at the time of sale of the property. After that sale, the new owner's will start over from scratch. Can't go after them for back dues from previous owners.

A HOA only needs a lawyer to represent them in court for the most part. Otherwise, they are just barnacles that can rot the HOA and bleed them dry. Leave the attorney on retainer but stop having the MC send over this non-payers until it's time to take action. 6 months of dues being owed is still enough time to get a lien in. Plus keep an eye on the LEGALS section of your local newspaper in the Classified section. It will tell you the properties being foreclosed on. See it then lien it...

Former HOA President

CharlesB17
Posts: 112

Posted:

In Florida it is required by law, Florida statute 720, an attorney is the only one allowed to file a lien against a property for a HOA. I can assure you of this. We lost cases challenged by the homeowner on the grounds we filed ourselves. I don't like paying attorneys. But, you need one to file a lien on a property in Florida. Ask an attorney.
This issue was one that made us look at the software we are using.
'nuff said - just my2cents

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Typically when a HOA goes to court they need an attorney to represent them. There are the few occassions where the HOA can decide to be represented by a qualified member but most would NOT choose that route. However, a Lien is NOT like other court related activities. It is done AT the courthouse but there's no appearance in front of a judge.

In our state, any individual HOA member or not, can file a "Mechanic's lien" against someone who is proven to owe them money. People who are building houses typically are the one's who experience this the most. If a Contractor working on their home doesn't show up to the job or doesn't act according to the contract, the owner can go to the courthouse and file a lien against that company. The lien is then lifted once the contractor finishes the contract.

I use this as an example because people often get confused in a HOA about the right to lien and what that means. They think taking people to small claims or court is the answer. Some have gone so far as wanting to ban the HOA from the ability to lien/foreclose. I say IF an individual has the right to lien for moneys NOT paid then why deny this right to a HOA/GROUP of homeowners?

This is why I don't believe that an attorney should be needed to file liens. It is helpful no doubt. Plus it may help IF the lien was done improperly. However, IF the lien was done improperly the owner is most likely taking the HOA to court over it, and that is when an lawyer is needed. Lawyers can be like vultures and prey on a HOA. It is also vice-versa as well. It's just best to know your options before consulting legal help.

Former HOA President

GregoryM2 (Texas)
Posts: 3

Posted:

What if the house is mortaged and being paid. But the dues, fines are not paid and reason for the fines not fixed. What can be done to make this person pay the dues/fines and fix the problems? Or can it be resolved with the mortage company/bank? This is in Texas.

JanetB2 (Colorado)
Posts: 4,219

Posted:

Hi Heather:

Are you seriously stating that if HOA fees are current yet the property is possibly under mortgage foreclosure that homeowners are charged $250 fee plus $50.00 per month the home is in foreclosure for monitoring? I am not an attorney, but I do not see how that would potentially be legal. I would be interested in knowing what is stated in the governing documents which allows such a scenario.

Your documents might state that a lien can be filed anytime if dues are late; however, they still must follow the state statutes. Any written notice or demand PRIOR to lien must provide the owner with 45 days to pay all amounts due.

720.3085Payment for assessments; lien claims.—

(3) Assessments and installments on assessments that are not paid when due bear interest from the due date until paid at the rate provided in the declaration of covenants or the bylaws of the association, which rate may not exceed the rate allowed by law. If no rate is provided in the declaration or bylaws, interest accrues at the rate of 18 percent per year.

(a) If the declaration or bylaws so provide, the association may also charge an administrative late fee in an amount not to exceed the greater of $25 or 5 percent of the amount of each installment that is paid past the due date.

(4) A homeowners’ association may not file a record of lien against a parcel for unpaid assessments unless a written notice or demand for past due assessments as well as any other amounts owed to the association pursuant to its governing documents has been made by the association. The written notice or demand must:

(a) Provide the owner with 45 days following the date the notice is deposited in the mail to make payment for all amounts due, including, but not limited to, any attorney’s fees and actual costs associated with the preparation and delivery of the written demand.

JanetB2 (Colorado)
Posts: 4,219

Posted:

Heather:

The more I think about this your association needs to check with your attorney. I think the board has some confusion happening with maybe the following scenario:

1. The PM is concerned if HOA does not have lien in place before a home goes into foreclosure that past HOA dues may not be obtained.

2. Board decides to have the HOA attorney monitor homes that are possibly going to become foreclosed. Attorney tells the board that this will cost $250 plus $50 per month for said service.

3. Board ASSUMED they could charge the homeowner for said service, when actually it is a cost to the association just for monitoring potential foreclosures. This also might be an expenditure that should have been voted on by members.

I would be willing to bet if the board tells the attorney they are charging the homeowners for the monitoring especially when they are current on their HOA dues, the attorney will tell them that is a bad idea and possibly illegal.

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